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ESALQ/BM&FBovespa Fed Cattle Index: 25th anniversary

The ESALQ/BM&FBovespa Fed Cattle Index will turn 25 years old in March, surpassing 6 thousand uninterrupted data releases. 1994 was the year when the Index was launched, and it started as a tool to reduce information asymmetry in the cattle market.  However, differently from other price indexes, the ESALQ/BM&FBovespa Index for fed cattle was created with the foremost goal to be the reference for the financial settlement of fed cattle futures contracts at São Paulo Mercantile and Futures Exchange (BM&F), recently renamed Brazil, Stock Exchange and Over-the-Counter Market (B3).

 

Before the creation of the Index, there were some regional prices, with less detailed methodology and calculation. Cattle raisers, for instance, needed to check several sources to have a reasonable estimate of the market price. Created by Cepea (Center of Advanced Studies on Applied Economics), at Esalq/USP, through a partnership with B3, this price reference for future contracts favors also physical trades, reducing transaction costs, market uncertainties and opportunism. Its use by agents of the fed cattle chain is currently spread all over Brazil.


During more than two decades of the Index existence, the market has faced several transformations, such as the decrease of the number of offices in business, which intermediate the relation between the cattle grower and the slaughterhouse, the increase of the international market importance and the internationalization of slaughterhouses, only to mention a few examples. These transformations have also brought challenges for Cepea and B3, such as the adjustments of the Index methodology to the changing conditions of the market.

 

The cattle herd in Brazil increased more than 35% between 1994 and 2017, according to IBGE. In this period, the production increased in North and Central-West in Brazil. Mato Grosso, for instance, which had been the sixth largest producer, moved to the first place. Rondônia and Acre states increased their herd in 300% and 500%, respectively, in the period. Cepea has tracked all these changes, increasing its data gathering effort in these regions.

 

The concentration of the beef industry, the decrease of the number of agents who intermediate trades and the production expansion have brought more challenges for Cepea to monitor the market based on a significant sample and scientifically adequate methodology, keeping the Index as a reliable reference for players in both the spot and the futures market.

 

In addition, changes of information technology and communication are likewise relevant and encouraging for Cepea. The cattle grower, who once was isolated at the farm, is currently connected not only with other players in Brazil but also worldwide.

 

In order to follow these changes and taking advantage of new technologies, Cepea released the app “Cepea Boi” (Cepea Cattle) in 2016, so producers are now able to inform their trades, having at the same time easy access to information provided by Cepea.

 

The fed cattle market has been evolving constantly, and, therefore, apps need to dynamically follow technological changes and its use by players, adapting to recent innovations.

 

Currently, Cepea contacts more than 6 thousand players, among slaughterhouses, cattle growers, offices that purchase and sell animals and auction companies. Moreover, Cepea releases prices of calf, lean cattle and ready-to-slaughter animals in 24 regions in 11 states in Brazil, along with values of beef traded in the Greater São Paulo.

 

This journey has been possible only because, since its beginning, players have been available to provide their information to Cepea, recognizing the importance, mainly for themselves, of the content produced by the Center, with scientifically adequate methodologies. The Index is a valuable asset to all its users, an example of the benefits of collective and cooperative action by farm and industrial producers, commerce and services. It brings benefits to all the production chain and, consequently, to the society as a whole.

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